Case Note: Competition Policy in Europe: Harming Incentives to Innovate

Intellectual Property and Competition Policy and Antitrust

Article Snapshot


Daniel Spulber


eSapience Center for Competition Policy, September 2007


This note looks at a European court’s decision against Microsoft.

Policy Relevance

The European case against Microsoft is poor economic policy and will harm innovation. The case makes little sense except as an attempt to harm a firm based outside Europe.

Main Points

  • The European Court of First Instance (EC) ruled in favor of the European Commission’s decision requiring Microsoft to reveal proprietary information to competitors.

  • Penalizing Microsoft for including its media player with Windows will make firms reluctant to add features to their products. 

  • The Commission argued that competition policy was more important than protection for intellectual property. This decision reduces incentives to innovate:
    • Market leaders in many industries across Europe hesitate to do costly research, fearing their intellectual capital will be forcibly shared with rivals.
    •  Small firms will try to free-ride off larger firms’  innovations and success, lobbying for competition authorities to help them build products that work with the dominant firms.
  • Protectionism is a possible motive for this decision, suggesting that European authorities fear global competition.

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